Wall St. Lifted by Positive Reports

Good news is good news again on Wall Street.

Strong economic reports and healthy corporate earnings lifted the blue-chip Standard & Poor’s 500 index to a fresh four-year high Wednesday, even as bond yields also edged up.

The market’s summer rally, some analysts say, shows that investors are focusing on the principle that economic and profit growth drive stocks, instead of worrying about the risk of inflation and higher interest rates as the economy expands -- the “good news is bad news” syndrome.

“We think we’re in a period of modest, sustainable earnings growth,” said Scott Wren, senior equity strategist at brokerage A.G. Edwards & Sons in St. Louis. “It’s just taken the market awhile to catch on.”

Stocks’ gains over the last four weeks have coincided with mostly bullish data on the economy, a trend that continued Wednesday.

The Federal Reserve’s latest report on regional economic growth showed that “activity continued to expand in June and early July,” the central bank said.

Also, the Commerce Department reported a 1.4% surge in orders for big-ticket goods in June, and a 4% jump in new-home sales that month to an all-time high.

Stocks struggled early in the session Wednesday but pushed ahead later in the day and finished broadly higher. The S&P; 500 rose 5.63 points, or 0.5%, to 1,236.79, eclipsing the previous four-year high set a week earlier.

The technology-heavy Nasdaq composite index added 10.23 points, or 0.5%, to 2,186.22, just shy of the four-year high it reached last week.

The Dow Jones industrial average gained 57.32 points, or 0.5%, to 10,637.09.

Winners outnumbered losers by about 3 to 2 on the New York Stock Exchange.

A slow but steady rally has lifted the S&P; 500 nearly 9% since late April and 3.8% since the end of June.

The market has advanced this month even as upbeat economic reports have triggered a sharp rise in Treasury bond yields. The yield on the two-year Treasury note, which is sensitive to changes in the Federal Reserve’s key short-term rate, hit a four-year high of 3.99% on Wednesday, up from 3.93% on Tuesday.

The benchmark 10-year T-note yield rose to 4.26% from 4.23%, and is up from 3.92% on June 30.

Excitement about continuing corporate earnings growth is trumping worries about interest rates, some analysts say.

“You are seeing the market starting to look at the glass as half full” instead of half empty, said Russ Koesterich, portfolio manager at Barclays Global Investors in San Francisco.

More than halfway through second-quarter reporting season, S&P; 500 companies are on track for 12% average growth in operating profit from a year earlier, according to data tracker Zacks Investment Research.

What’s more, recent upward revisions from brokerage analysts have lifted estimated third-quarter profit growth for the S&P; 500 to 16%, Zacks said.

Still, Koesterich said, stocks’ rally could fade if investors began to believe that economic or inflation pressures made it likely the Fed would keep hiking interest rates well into 2006. Many Wall Street pros are betting the Fed will be done tightening credit by year’s end.

The central bank has boosted its short-term rate nine times since last summer, to 3.25%. Economists say at least three more quarter-point increases could come this year, taking the rate to 4% by December.

The Fed next meets Aug. 9.

Among the day’s market highlights:

* Amazon.com blazed up $5.91 to $43.65 after the Internet retailer reported brisk quarterly revenue growth.

Earnings reports also boosted Botox maker Allergan, which rose $4.98 to $90.40; Sprint Fon, which climbed $1.40 to $26.37; and retailer Guitar Center, which jumped $2.84 to $64.64.

* Disappointing profit results hurt casino operator Boyd Gaming, which fell $4.17 to $50.65, and Web directory service InfoSpace, which plunged $10.58 to $24.21.

Also, lower profit guidance clipped Tupperware, which lost $2.76 to $21.49, and restaurant chain P.F. Chang’s China Bistro, which sagged $6.46 to $56.66.

* Johnson & Johnson rallied $1.87 to $64.54, helping the Dow, after a Lehman Bros. analyst called the stock undervalued.